Decentralisation Trends in OECD Countries
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- The OECD area has become more decentralised over the last two decades, with reforms profoundly changing fiscal decentralisation in some countries. Motivations for reforms vary and include both democratic and economic factors. - Recent trends include changes to responsibilities, especially in education, transport, and health, as well as multi-level governance reforms involving institutions, public management, and territories. - While decentralisation provides benefits like efficiency and democratic governance, it also risks inefficiencies and disparities if not implemented properly with adequate capacities, resources, coordination, and fiscal frameworks at subnational levels.
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Decentralisation Trends in OECD Countries
- 1. Decentralisation trends in OECD countries: a comparative perspective for Ukraine Dorothée Allain-Dupré Senior Project Manager Regional Development Policy Division OECD
- 2. 1. The current picture: decentralisation around the world 2. Recent trends in decentralisation reforms 3. Some lessons: making decentralisation work Outline of the presentation
- 3. The governance system of subnational government the OECD Federations & quasi-federations Unitary countries 38 960 3 818 360 579 78 2 489 1 788 2451 478310 8 186 36 004 8 176 419 31 74 11 510 446 311 314 255 338 3 197 2 935 2 109 2 320 605 402 2 874 6 272 103 105 212 213 35 countries: 9 federal and 26 unitary including 137 635 subnational governments in 2015-2016: • 133 007 municipal-level entities • 4 108 intermediary-level entities • 520 regional or state-level entities 119
- 4. • The OECD institutional landscape which has dramatically changed over the last 20 years, especially since the crisis as a result of decentralisation or recentralisation processes. The OECD: an institutional landscape very diverse and complex at subnational level 9 countries with only one level: - Municipalities 18 countries with two levels: - States/regions - Municipalities 8 countries with three levels: - States/regions - Intermediary gov. - Municipalities 9 federations and quasi- federations Australia Austria Canada Mexico Switzerland Germany Belgium Spain1 United States 25 unitary countries Estonia Finland2 Ireland Iceland Israel Latvia Luxembourg Portugal2 Slovenia Chile Korea Denmark Greece Hungary Japan Norway New Zealand Netherlands Czech Republic Slovak Republic Sweden Turkey France Italy Poland United Kingdom3 Ukraine Notes: 1. Spain is a quasi-federal country. 2. Finland and Portugal have autonomous regions on part of the country. 3. There is an intermediary level only on part of England. Almost 138 000 SNGs in the 35 OECD countries in 2015-2016
- 5. 5 SNGs are key economic and policy actors across the OECD 40% 63% 59% 32% 20% Greece New Zealand Chile Estonia Greece Canada Canada Canada Canada Canada 31% 60% 55% 24% 4% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Expenditure Staff expenditure* Investment Tax revenue Debt*** OECD Minimum Maximum Ukraine% of general government - 2014 *: No data for Chile and Australia **: Debt OECD definition ie including, in addition to "financial debt", insurance reserves and other accounts payable. No data for Mexico, Chile and New Zea
- 6. Degrees of decentralisation varies largely in OECD countries AUS AUT BEL CAN CHL CZE DNK EST FIN FRA DEU GRC HUN ISL IRL ISR ITA JPN KOR LUX MEX NDL NZL NOR POL PRT SVK SVN ESP SWE CHE TUR GBR USA OECD34 EU28 OECD25 OECD9 0% 10% 20% 30% 40% 50% 60% 70% 80% 0% 5% 10% 15% 20% 25% 30% 35% 40% Subnationalexpenditureasashareoftotal publicexpenditure(%) Subnational expenditure as a share of GDP (%) Subnational government expenditure as a percentage of GDP and total public expenditure (2014)
- 7. …. And around the world: 25% of total public spending i.e. 9% of GDP AUT BEL BGR HRV CYP CZE DNK EST FIN FRA DEU GRC HUN ISL IRL ITALVA LTU LUX MLT NLD NOR POL PRT ROU SVNSVK ESP SWE CHE GBR ARG BRA CHL COL CRIDOM ECU SLV GRM HND JAM MEX PRY PER ISR JOR PSETUR ALB ARM AZE GEO KAZ KGZ MDA MNE RUS SRB UKR AGO BEN BFA CPV COG GHA GIN KEN MWI MLI MUS MAR NGA UGA SEN ZAF TZA TCD TUN ZWE AUS KHM CHN IND IDN JPN KOR MYS MNG NZL PHLTHA VNM CAN USA 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 0% 5% 10% 15% 20% 25% 30% 35% 40% SNGexpenditureas%ofpublicexpenditure SNG expenditure as % of GDP OECD average Global average 9% 24% 40% 17%
- 8. Wealthier countries tend to be more decentralised… TCDGIN COGKHM MLTGRM DOMJAM AZEBENMWIBFA CRI CYPTUNSEN MUSMLI JORARMPRYSLVZWE MYSCHLHNDUGA PSEKEN GRCMARTZA THA IRLTURALB CPV ECU NZL NGAKGZ GEO ISRMNE SVKPRTIDN HUNGHA SRB BGR LTUPER ROU KAZMNGMDA SVNEST CZELVA GBRFRAPHL HRVMEXCOL POL ISLKOR NLDIND ITAUKR NOR JPN AUS AUT USA VNM CHEDEUCHN ESPZAF BRA BEL FIN RUS SWE CAN DNK ARG R² = 0.3555 0% 5% 10% 15% 20% 25% 30% 35% 40% 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 SNGexpenditureasa%ofGDP GDP per capital (USD PPP)
- 9. Some policy areas are more decentralised than others: education, social protection, health, public transport, housing 21.8% 20.3% 13.8% 12.5% 9.4% 8.8% 5.7% 5.4% 2.4% % of total SNG expenditure Defence, security and public order Environmental protection Recreation, culture and religion Housing and community amenities Health Social protection Economic affairs & transport General public services Education Breakdown of SNG expenditure by economic function 2.6% 1.9% 1.9% 1.5% 1.5% 0.6% 0.5% 0.4% 0.3% % of GDP Defence, security and public order Environmental protection Recreation, culture and religion Housing and community amenities Economic affairs & transport Health General public services Social protection Education
- 10. 10 What are the sources of SNG revenues? Tax revenues account for 44% of SNG revenue in the OECD
- 11. Spending is more decentralised than revenues: the risks of fiscal imbalances
- 12. 1. The picture in 2016: decentralisation around the world 2. Recent trends in decentralisation reforms 3. Some lessons for countries at the early stage of their decentralisation process
- 13. • The OECD area has grown more decentralised over the last two decades at least, although reforms that have profoundly changed the institutional set-up of fiscal decentralisation are confined to a few countries • Motivations vary across countries Mainly democratic/political motivations: eastern European countries (decentralisation wave in 2000, 2004, 2006: Poland, Slovakia, Czech Rep, Estonia, Hungary, etc.) Mainly economic/public finances motivation: Greece, Italy, Portugal • Changes /rationalisation in allocation of responsibilities: Mostly in the field of education Public transport Health care: both decentralised and recentralised (Norway) 13 Different motivations for decentralisation reforms in the past 2 decades Broader context of Multi-level Governance reforms
- 14. MLG reforms: three interconnected dimensions Institutional: re-organising powers, responsibilities and resources Public management: re-organising administrative processes Territorial: re-organising territorial structures France, Finland Italy New Zealand Japan Ukraine
- 15. A regain of actions on MLG reforms across OECD countries Institutional reforms Fiscal reforms Territorial reform at regional level Territorial reform at intermediary level Municipal (mergers, IMC, metropolitan) Australia X X State level Austria X State level Belgium X X Regional level Regional level Germany X X State level State level Spain X X + Regional level Chile X X X Czech republic X X Estonia X X X Finland X X X X France X X X ? X Greece X X X X Hungary X X X Iceland X X Ireland X X Italy X X X X Japan X X ? X Luxembourg X Netherlands X X ? X New Zealand X X Norway X X X X Poland X X ? X Portugal X X Sweden X X X X Turkey X United Kingdom X X X UKRAINE X X X
- 16. 1. The picture in 2016: decentralisation around the world 2. Recent trends in decentralisation reforms 3. Some lessons
- 17. 17 Decentralisation includes a number of benefits, but needs to be properly done Opportunities Risks Efficiency and improved local public services • More capacities for place-based policies • Better local public service delivery • Lower costs • Mobilisation of local public resources • Incentives for pro-active local development approaches • Mobilisation of comparative advantages of local enterprises • Room for experimentation • Diseconomies of scale • Duplication/overlap in competencies • Lack of human/technical capacities • Unfunded mandates • Rising disparities across jurisdictions • Increased competition Democratic governance - Enhanced transparency and accountability - Enhanced citizens’ participation - Reflects better citizens needs • Local politics and bad local governance • Corruption • More complex governance structure – more coordination costs
- 18. Adequate capacities at subnational government Sufficient resources to meet new responsibilities Balance in the way various policy functions are decentralised Adequate coordination mechanisms Effective monitoring systems at the central government level Coherent fiscal constitutions 18 Some pre-conditions that need to be met in all cases:
- 19. Keep flexibility in implementation Allow for pilot experiences in specific places/regions Define short term objectives/projects… Within a broader strategic framework/long-term perspective Not necessarily one side-size fits all. decentralisation may include asymmetric arrangements 19 Some pre-conditions that need to be met in all cases:
- 20. • Invest using an integrated strategy tailored to different places • Adopt effective co-ordination instruments across levels of government • Co-ordinate across SNGs to invest at the relevant scale Pillar 1 Co-ordinate across governments and policy areas • Assess upfront long term impacts and risks • Encourage stakeholder involvement throughout investment cycle • Mobilise private actors and financing institutions • Reinforce the expertise of public officials & institutions • Focus on results and promote learning Pillar 2 Strengthen capacities and promote policy learning across levels of government • Develop a fiscal framework adapted to the objectives pursued • Require sound, transparent financial management • Promote transparency and strategic use of procurement • Strive for quality and consistency in regulatory systems across levels of government Pillar 3 Ensure sound framework conditions at all levels of government OECD Recommendation on Multi-level Governance of Public Investment
- 21. • Series of seminars (2017-Q1 2018) • Second fact finding mission: March 2017 • Final report: end 2017 21 Next steps OECD support on Decentralisation in Ukraine